SVOBE wants 4.5 million guilders from Education Ministry Financial woes could lead to closure of secondary schools

POSTED: 02/27/14 12:21 AM

St. Maarten – The Foundation for Secondary Education (SVOBE) needs an immediate cash injection of 4.5 million guilders from the Ministry of Education, otherwise the foundation threatens to file for bankruptcy and Milton Peters College and the Sundial School will have to close. That is the position of SVOBE in a lawsuit it brought to the administrative court yesterday afternoon.

Judge Katja Mans wants to give the foundation and the ministry until Tuesday to work out a settlement. The SVOBE will provide the ministry with financial information before Thursday noon. If parties have not reached an agreement by Tuesday, they will come back to court and then the court will rule on the dispute by next week Friday.

The attorneys for SVOBE, Camiel Koster and Joerie Essed told the court that their client is in grave financial difficulties. Based on a report from Baker Tilly the foundation accumulated a 5.5 million guilders deficit between 2010 and 2012, and the deficit for 2013 stands at 2.9 million for a total of 8.4 million guilders.

Because of its precarious situation, SVOBE has stopped paying certain creditors, and the debt to these parties is currently a bit more than 2 million guilders. The foundation has left premiums unpaid to pension fund APS, wage tax, social premiums and utility bills for Gebe. Furthermore, the foundation has used almost 1.7 million guilders it should have reserved for vacation payments to its personnel, for recruiting costs and for the purchase of school materials.

“SVOBE has been forces to use its credit facility at the RBC bank,” Koster told the court. “The limit of this facility of 600,000 guilders (a bit over $335,000) at 10 percent interest. If my client exceeds that limit, the interest goes to 18 percent. In that situation the bank could also refuse to process payment orders.” In 2013, SVOBE paid almost $39,000 in interest for this credit facility.

Koster presented the figures in court to illustrate that SVOBE is in “acute financial problems.”

The season the foundation is struggling with its finances is due to the so-called lump sum system, Koster said. This system assumes a maximum class size of 24 students and links the number of students to the number of classes – and thereby to the number of teachers a school needs to employ. “That works very well for primary schools,” Koster said, but not for secondary schools, because by law they have to offer specific courses and employ qualified teachers. A chemistry teacher is not allowed to teach geography.”

While every course requires a separate teacher, class size varies and is sometimes as low as 16. “The lump sum system does not take into account that secondary schools need more teachers,” Koster said.

Before 2010, the ministry of Education funded schools based on a compensate-and-giving-account system; this worked with formation points and took the difference in class sizes into account. Under this system, SVOBE would have received a bit more than 8 million guilders more in funding since 2010, Koster said.

In 2012, personnel costs for the two schools amounted to 16.2 million guilders, but the ministry paid only 15.8 million. In 2013, personnel costs increased to 16.5 million guilders, while compensation decreased to 14.7 million.

“Saving on personnel costs is not possible,” the attorney said, “because the law prescribes the number of students in a class, the number of hours they have to be taught and the salaries teachers must receive.”

SVOBE needs 3.75 million guilders to satisfy its creditors and its short-term financial commitments. The foundation battles a monthly deficit of close to 250,000 guilders. to prevent immediate new deficits, it also asks the court to cover the next three months for 750,000 guilders.

The attorney for the Ministry of Education, Richard Gibson Jr., noted, “the impression is being created that the foundation needs 4.5 million guilders to keep the schools open. There is no emergency situation at all,” he said. “It is not possible to conclude that this will lead to the immediate closure of the schools.”

Gibson said that SVOBE has not substantiated the debt it has at the RBC Bank or its threatening liquidity shortage. Neither did the foundation give any insight on the minimal costs it needs to keep the schools open. “The schools receive 1.3 million guilders each month to cover their expenses.”

The attorney pointed out that the foundation has put teachers in scale 16 (on a scale that maxes out at 20) and that this on the high end. “The SVOBE is free to decide on the scale it puts its teachers in. Scale 15 is used to calculate the compensation.”

Joseph Rogers, a board member of SVOBE told the court that the lump sum system is wrong. “There ought to be a simulation model that reviews the compensation against reality,” he said. “We scale our teachers according to the rules. Before the introduction of the lump sum system we did not have a deficit.”

Judge Katja Mans spent quite some time questioning both parties to obtain a good understanding of the way the ministry compensates the foundation. She suggested a quick scan to get clarity about the urgency of the situation. To this end, SVOBE agreed to provide all the financial and operational information the ministry needs to assess the situation.

Before the judge closed the hearing, Gibson pointed out that the now criticized lump sum system was set up in consultation with the schools. “Yesterday there was a meeting the minister personally attended and there this issue was not even brought up,” he said.